HOUSING: Rental Index Remains Stable

Recent Western Cape Business News

The Trafalgar residential rental index rose by 11,2% in the year to June despite signs of SA’s residential tenants coming under increasing financial strain. But most of that happened last year.

Rents have only increased nationally by 7,5% since the beginning of the year.

“Its possible that growth will fall further to December and into 2010,” says Trafalgar MD Andrew Schaefer. “Its possible that the index can turn negative next year if job losses continue. At this stage we think a fall is unlikely. If it happens it will be the first time since 1976/77.

“It shows how steady and predictable residential rental is – if it is properly managed.”

The index was pulled up by an unusual 21,5% increase in rents in Pretoria that has a large population of civil servant tenants whose jobs are secure. Cape Town (9,9%) and East London (9,5%) were the only cities where rents rose in single digits. But despite lagging the rest, East London’s index at 190 has shown the biggest growth from the 100 base year in December 2003. Cape Town at 155 is the laggard over the 5½ years.

But the only cities to show annualized double-digit increase in the first six months of 2009 were Port Elizabeth (18%) and Pretoria (21,5%). Johannesburg, which increased 12,2% in the year to June rose only 5,3% annualized in the first six months of this year.

Schaefer says he’s aware that data from other organisations already show prices falling. “There could be three reasons for this,” he says. “Firstly, we use the increase or decrease in rent on specific flats rather than taking the average rent of all flats. This excludes new properties that come on our books.

Secondly, most of the rental problems appear to be at the upper end of the rental market, above R12 000 a month while the bulk of our properties are in the middle range below that where there are fewer defaulting tenants.

Thirdly, our properties are managed by one organisation that is dedicated to rental properties.”